Assignment one particular Q

 Assignment you Q Essay

Assignment1

MGCR382InternationalBusiness

Fall2014

Remarks

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Question1(Trade):

Welookatthemarketforradios. InChina, thedemandandsupplyofradiosisdescribedby 300 20 ∗

40 twenty ∗

IntheUS, demandandsupplyisdescribedby

three hundred and fifty 50 ∗

100 60 ∗

IgnorethefactthattheUSandChinahaveadifferentcurrency. a. (5Points)Ifnotradeisallowed, whatwillbethepricesofradiosintheUSandinChina? Explainandsupportyouranswerswithcalculations.

Assignment1, MGCR382, Fall2014

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b. (5Points)IfChinaandtheUScantradefreely, whoexportsradios, whoimportsradios, whatistheworldpriceofradiosandwhatisthequantityofradiostraded? Explainand supportyouranswerswithcalculations.

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c. (5Points)TheUSdecidestosupportitsradioproducersandintroducesageneralsubsidy forradioproduction. Underthissubsidy, theUSpays2perradioproducedandsoldtoits producers(forsimplicity, thesubsidyisgrantedtoproducersregardlessiftheradiois ultimatelysoldtoaUSortoaChineseconsumer). Whatwillbethenewquantityofradios tradedandwhatwillbethenewworldpriceofradios? Explainhowthenewworldprice andthequantitytradedaredifferentfromtheansweryoufoundinquestionb. Support youranswerswithcalculations.

Sign: YouneedtounderstandhowthesubsidyisaffectingtheUSsupplycurveofradios.

Assignment1, MGCR382, Fall2014

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RadioproducersinChinacomplainandarguethattheUSsubsidyisunfair. TheydemandthatChina imposescountervailingdutiesonUSradioimports. Chinaisconsideringtwooptions: 1 . Imposinganimporttariff.

installment payments on your Imposinganimportquota.

g. (5Points)WhatwouldbethespecificimporttariffthatChinawouldhavetoimposeon importedradiostorestoreaChinesemarketpriceforradiosequaltotheworldpriceof radiosthatprevailedbeforetheintroductionoftheUSsubsidy(i. e. inquestionb)?

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e. (5Points)IfChinaoptedforthequotainstead, whatwouldbethequotatorestorea Chinesemarketpriceforradiosequaltotheworldpriceofradiosthatprevailedbeforethe introductionoftheUSsubsidy(i. e. inquestionb)?

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Question2(ExchangeRates):

Youobservethefollowingquotes:

EUR/USD:

1 ) 5

CHF/USD:

2

a. (2Points)Whatisthecross‐rateCHF/EURimpliedbythesequotes?

n. (5Points)IftheCHFappreciatesby10%againsttheUSDandtheUSDdepreciatesby15% againsttheEUR, doestheCHFappreciateordepreciateagainsttheEURandbyhowmuch?

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Nowsupposethatyoucannottradeatthequotesgivenin...